Warning

$19.2 Million in Denied Claims Since Q1 2010

By Original story posted on:
October 6, 2010

The AHA has released a report outlining the second-quarter results of its RACTrac project. Titled Exploring the Impact of the RAC Program on Hospitals Nationwide Overview of AHA RACTrac Survey Results, 2nd Quarter 2010, the complete report is available on the AHA website at http://www.aha.org/aha/issues/RAC/ractrac.html.

RACTrac is an American Hospital Association (AHA) initiative launched in the first quarter of 2010 to collect RAC (Recovery Audit Contractor) activity data from hospitals on a quarterly basis in order to assess the impact of the RAC program on hospitals nationwide. AHA created RACTrac, a free, web-based survey, in response to a lack of data and information provided by the Centers for Medicare & Medicaid Services (CMS) on this impact. RACTrac findings reveal many valuable insights for the hospitals that report the data, the AHA, and state hospital associations, which can use the information to educate the field and inform CMS and Congress of changes needed for the program.

The results of the second-quarter report show that participation in RACTrac has more than doubled since the first report, with 1,389 hospitals participating. More than two-thirds of those hospitals experienced RAC activity during the first quarter of 2010. The majority of hospitals reporting RAC activity were general medical and surgical hospitals, with many different types and sizes of hospitals subject to RAC review.

Overall Activity

RAC Region C had the highest number of hospitals reporting activity, but RAC Region D had a higher percentage of participating hospitals reporting activity. A higher percentage of hospitals reported automated reviews during the second quarter than during the previous quarter, but RACs continue to focus their efforts on complex reviews. The majority of RAC activity through the midway point of the year has come in the form of medical record requests. Region C had the highest amount of Medicare payments targeted in medical record requests: more than $214 million.

Denials

Approximately $19.2 million in denied claims have been reported since the first quarter of 2010, with nearly $11 million in Region C alone. Eighty-five percent, or more than $15.5 million, of the total denied value came as the result of complex denials. By the second quarter of 2010, Region B had nearly half of all reported denials.

The average dollar value of an automated denial was $311, and the average dollar value of a complex denial was $5,598. Hospitals reported that automated denials had the largest financial impact in the outpatient service area, while complex denials had the largest financial impact among inpatient service areas. Automated denials for outpatient billing errors had the largest financial impact on reporting hospitals. Incorrect coding of MS-DRGs or other coding errors represented the top reason for complex denials, at 86 percent of the total.

Appeals

Hospitals reported appealing 1,892 RAC denials that were eligible for appeal. Hospitals also reported appealing denials totaling more than $5 million in value, and 16 percent of hospitals reported appealing at least one RAC denial. Of the claims that have completed the appeals process, 13 percent were overturned in favor of the provider; 1,571 claims are still in the appeals process.

Of the completed appealed claims, two-thirds of the overturned denials were reported in Region D. Hospitals reported a total of $420,870 in overturned denials, with $273,113 in Region C alone.

Administrative Burden

Eighty-six percent of responding hospitals reported that RACs impacted their organization during the second quarter of 2010, and 51 percent reported increased administrative costs. The report shows that although the administrative burden of the RAC program is spread across all types of hospital staff, medical records staff spent the most time responding to RAC activity.

Participation in the Program

Participation of AHA member hospitals is critical to the success of this vital initiative. If you aren't participating, do consider joining the efforts. Quarterly webinars are offered to get information out to providers about participating; the next session is scheduled for 2-3:30 p.m. EST on Oct. 7.

About the Author

Carla Engle, MBA, is a product manger for MediRegs, a Wolters Kluwer company. Her background includes more than 20 years in hospital and physician practice operations, particularly in reimbursement and billing functions. Prior to joining Wolters Kluwer recently, she was the vice president of compliance for a national revenue cycle solutions company and prior to that was in the Reimbursement Training Department with HCA. For several years she headed up the Part A Fraud Investigation Unit for a CMS Program Safeguard Contractor (PSC) where she was successful in the prosecution of several national cases. In her revenue cycle compliance capacity, she worked with a number of clients in California and Florida with Recovery Audit Contractors (RACs) in setting up processes and appeals.